Priva Technologies didn’t do well in its business. It financed its business, first, by taking a loan and granting a security interest in assets, including in its software, and second, as part of a reorganization, by assigning the improvements in the software to a licensee. Then it shuttered. Who owns the improvements?

The original technology was a microchip encryption technology known as the Secured Key Storage Integrated Circuit (SKSIC). Priva first obtained a secured loan from defendant Pro Marketing, granting Pro Marketing a first-position lien on all its assets. The agreement defined “Collateral” as

all types or items of personal property owned by [Priva], whether now owned or hereafter arising or acquired, and wherever located, or in which [Priva] now has or at any time in the future may acquire any right, title or interest, including, without limitation, all of the following property . . . (xv) all Intellectual Property;

In turn, “Intellectual Property” was defined as

all rights, priorities and privileges relating to intellectual property . . . , including without limitation the Copyrights, the Copyright Licenses . . . , and all Goodwill associated with or arising in connection with any of the foregoing.

Despite the loan Priva still had to file for bankruptcy and, as part of its reorganization, and over Pro Marketing’s objections, the bankruptcy court allowed Priva to enter into a Design Service and Intellectual Property License Agreement with plaintiff Cyber Solutions International. Priva was to license SKSIC and create a second generation product for Cyber Solutions. The license agreement provided that

[a]ny updates, modifications or improvements to the Licensed Technology [i.e., SKSIC] developed by [Priva] and paid for by [Cyber] shall be the property of [Cyber.] [Priva] agrees to assign and agrees to assign in the future (when any such updates, modifications, or improvements to the Licensed Technology are first reduced to practice or first fixed in a tangible medium, as applicable) to [Cyber] all right, title and interest in and to any and all updates, modifications, or improvements to the Licensed Technology (and all proprietary rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by [Priva], either alone or jointly with others, during the period of Design Services engagement with [Cyber].

The license agreement recognized that SKSIC was subject to Pro Marketing’s security interest.

Priya developed a new product known as Tamper Reactive Secure Storage (TRSS). The parties do not dispute that TRSS is an “update, modification or improvement” of the SKSIC technology.

Priva still couldn’t make a go of it and ceased operations. Who owns the TRSS technology? Answer in a few days.

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Ms. Chestek is admitted to practice in Connecticut, the District of Columbia, Massachusetts, New York and North Carolina and is Board Certified by the North Carolina State Bar's Board of Legal Specialization in Trademark Law.

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